Source: F&C Investments
What is the main aim of your investments?
| Answer options |
Response per cent |
| Income | 15.0 per cent |
| Growth | 45.8 per cent |
| Combination of both |
39.3 per cent |
Source: F&C Investments
This is despite the interest this year in income investments. For example, UK growth and income trusts were trading at premiums to NAV earlier this year although most are trading at a discount to NAV again, with the sector average at -6.8 per cent according to WINS data as of 3 September.
Meanwhile, among open-ended funds bonds have continued to enjoy high interest with the Investment Management Association reporting that of the £2.3bn net retail sales into UK domiciled funds in July £829m went into bond funds while £711m went in to equity funds.
The most popular sector in July 2009 was Sterling Corporate Bond, accounting for 13 per cent of gross retail sales of UK domiciled funds, with this sector also the most popular UK domiciled net retail sector for the ninth month in a row with an inflow of £466.6m.
But investors are starting to show interest in other sectors, according to fund supermarket Cofunds.
In addition, an August survey of fund managers by Chelsea Financial Services found that 12 per cent of respondents believe bonds will outperform equities over the next 12 months, while an overwhelming 88 per cent feel equities will outperform bonds.
Chelsea Financial Services head of research, Juliet Schooling Latter commented: "It is interesting that equities are almost universally favoured over bonds, while bond funds remain the overwhelming choice for investors according to IMA figures. I suspect this is due to the requirement for income amid the backdrop of rock bottom interest rates."
F&C said of its survey: "As the survey is conducted entirely online, it is possible it has captured a younger demographic, who are more likely to seek growth from their investments than the post-retirement generation who may be relying on dividends as a source of income.
But it added: "With interest rates at an all-time low, the dividend yields available on equities – not to mention on other asset classes like commercial property – can provide an important boost for an income seeking investor. However, growth investors can benefit from this too, as reinvestment of dividends can provide an important boost for future growth."
Some respondents to the survey left comments explaining their strategy, with one balanced investor saying: "Income to spend - growth for inheritance for children."
Another commented: "I think I should go more for growth at the moment," while one growth focused investor summed up the mood of the market, saying: "Holding my breath that the market continues to rise on the back of exiting the recession."
Meanwhile Iain Scouller, partner at Oriel Securities, argues that as growth orientated investments have been out of favour for a while as investors have sought yields, a shift back to growth is due - in particular if inflation and then interest rates rise. Therefore, it is a good time for investors to re-position themselves.
When interest rates rise income stocks typically under perform while growth stocks benefit, and Scouller added that technology stocks tend to be at the forefront of growth.